[Congressional Record Volume 143, Number 81 (Wednesday, June 11, 1997)]
[Senate]
[Page S5542]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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           MEDICARE AND THE ADJUSTED AVERAGE PER CAPITA COST

 Mr. GRAMS. Mr. President, during the Budget Committee's debate 
on the fiscal year 1998 budget resolution, I joined with my colleague 
from Oregon, Senator Wyden to introduce a Sense-of-the-Senate amendment 
regarding the Medicare reimbursement rate for health plans. In fact, 
most of my colleagues on the Budget Committee cosponsored this 
amendment, and I was pleased to see it incorporated into the final 
budget resolution passed by the Senate.
  Reforming the way Medicare determines the reimbursement rate for 
managed care plans is critical to provide Medicare equity in States 
like my home State of Minnesota--especially for those citizens in rural 
communities in my State and throughout the country.
  Mr. President, there are three points I would like to emphasize.
  First, the Medicare reimbursement rate is unfair. While every 
American pays the same 2.9-percent payroll tax to the Medicare trust 
fund, Minnesotans find themselves with the second-lowest reimbursement 
rates in the Nation. Every single county in Minnesota falls below the 
national average in terms of Medicare reimbursement. In fact, Minnesota 
is not alone in this category. There are 16 States in which every 
county is below the national average--Iowa, Idaho, Maine, Minnesota, 
Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oregon, 
South Carolina, South Dakota, Vermont, Washington, Wisconsin, and 
Wyoming. Clearly, Mr. President, having this many States without a 
single county at the national average indicates something is wrong with 
the system.
  Second, the Medicare reimbursement formula discourages quality health 
care. Minnesota has consistently been recognized throughout the Nation, 
and perhaps the world, as one of the most innovative, efficient, cost, 
and quality-conscious States in terms of health care. Yet, these same 
traits--which should be encouraged, not discouraged--have skewed the 
Medicare formula against our providers and beneficiaries. We are being 
penalized for our success, while those less efficient States benefit--
and have no incentive to move in our direction.
  Mr. President, I think it is clear to everyone that efficient health 
care markets have reduced overutilization, eliminated unneeded hospital 
beds, and aimed for the highest quality service at the lowest price. 
Urban areas that are efficient in delivering health care--like 
Minneapolis, MN--decrease overutilization in the fee-for-service 
category of Medicare. This reduces the adjusted average per capita cost 
[AAPCC] which makes it difficult for health plans to remain competitive 
due to the lower payment.
  Third, the Medicare reimbursement formula discriminates against 
seniors who live in rural communities. These rural Americans already 
face fewer health care options than those living in urban centers. 
Because of the lower reimbursement rates health plans receive, there is 
no incentive for them to offer their services--let alone provide extra 
benefits many seniors in other States receive at no added cost. That 
means even fewer choices for the senior citizens living in rural 
Minnesota.
  Mr. President, no one would suggest that we take away the extra 
benefits seniors receive in other States; indeed, we should encourage 
health plans to do what they can to provide these benefits, while at 
the same time focusing on the need to become more efficient and cost-
effective. However, what we are saying is that senior citizens living 
in rural America should at the very least have the opportunity to make 
these same choices in their health care plan.
  I'd like to conclude by offering an example of how the disparity in 
payment affects the benefits of two seniors living in different States.
  A Medicare beneficiary living in Blue Earth County, MN, who would 
like to enroll in a health plan would have none offered at the 
reimbursement rate of $302 a month. Not one health plan is willing to 
offer even basic Medicare coverage at this rate. He or she would have 
no choice but to enroll in the fee-for-service plan and incur higher 
out-of-pocket expenses.
  However, this same beneficiary's brother, sister or cousin living in 
Los Angeles County, CA would have their choice of 15 health plans 
offering full Medicare coverage and in addition, receive a $1,500 
prescription drug benefit, $150 credit for hearing aids, and dental 
coverage. Why do they have these choices? Because their health plans 
are reimbursed $519 a month and can afford to offer the extra benefits. 
This disparity is not fair--and it must be fixed.
  Mr. President, while I am pleased the Senate has gone on record in 
support of my sense-of-the-Senate amendment included in the budget 
resolution, we need to move forward in changing the system. As we begin 
consideration of the reconciliation bills, I ask all my colleagues to 
examine this issue carefully and restore some equity in this outdated 
formula.

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